Maine’s surplus $69.4M Finance chief sees economy growing

AUGUSTA – Maine revenues, for the most part, continue to come in above estimates with May figures indicating the state revenue surplus has grown to $69.4 million with only this month remaining in the state budget year.

“Generally good news,” Grant Pennoyer, director of the Office of Fiscal and Program Review, told legislative leaders at their monthly meeting. “The General Fund was up again this month [May] by $28.5 million.”

The General Fund is the accounting name for the fund where all state revenues are deposited except those dedicated to a specific fund, such as the gas tax that goes into the Highway Fund.

“That is correct,” Finance Commissioner Becky Wyke said. “The individual income tax is $29.5 million above estimates, and the corporate income tax, which has just outperformed itself over and over again this year, is $23 million above estimates.”

Wyke said the state sales tax also is doing better than expected by $14 million, and that is significantly contributing to the state surplus which she calls good news.

“We are seeing the growth right in the revenue lines that show we have a growing economy,” she said. “Those three lines make up nearly all the growth.”

But not everyone sees the increase in revenue as good news. Republican leaders such as Senate Minority Leader Paul Davis, R-Sangerville, said the additional revenue should be looked on as “an overcollection of taxes” and that the state’s high tax burden is the reason for the surplus.

“It’s good news if you want to spend more money,” said Sen. Carol Weston, R-Waldo. “But I think Maine people, knowing they are the highest-taxed state in the nation, would like to keep that money and spend it on their families.”

The assistant GOP leader in the Senate said the state should pay its bills with the extra cash. She said when the bills are paid, lawmakers then should consider lowering tax rates to avoid overcollection of taxes in the future.

All state General Fund revenues are expected to total $2.857 billion this budget year, but with another month of revenues to be collected, Wyke said it is clear the revenue surplus should total at least $70 million.

“We only have partial figures for June,” she said, “but no one has seen anything to worry about so far.”

Not all revenue lines are performing as expected. The catch- all “other revenues” line, which includes a wide variety of items including revenues from fees and fines, is $1.7 million below estimates. But leaders expressed concern about the Highway Fund where two-thirds of the revenue comes from fuel taxes which is $1.7 million below projections with only June left in the budget year.

House Democratic leader Glenn Cummings, D-Portland, questioned why revenue from fuel taxes is below estimates for the year by $2.9 million. Pennoyer responded that most analysts believe the higher price of gasoline has resulted in consumers cutting back on driving.

“In the special fuel taxes, where businesses have to travel to do their work, we have not seen a decline,” Pennoyer said.

Smaller Highway Fund revenue lines, such as inspection fees and fines, are also below estimates. Motor vehicle registrations and fees bolstered revenues in May by coming in $2.3 million over estimates.

The Highway Fund is now $1.7 million in the red for this budget year.

When the budget year ends June 30, there could be another $5 million to $10 million in unspent funds that lapse from General Fund accounts across state government. That is added to the additional revenue to get the total state surplus.

The surplus is not truly “extra cash” because state law spells out how the money is allocated. The governor’s contingency fund gets restored to $300,000, and $1 million goes into the reserves at the Finance Authority of Maine before any other allocation.

The largest chunk of the remaining dollars is 35 percent that goes into what is commonly called the Rainy Day Fund, which already has about $100 million set aside for budget emergencies.

Two other accounts, the working reserve and the fund to pay down the state pension liability, each get 20 percent of the surplus.

The unfunded liability in the retiree health benefit plan gets 15 percent of the surplus, and 10 percent is set aside for capital repairs of state facilities.